Sovereign wealth fund: a cure-all for SOE woes?


Islamabad, Nov 05 (TNS): Once again, we are knocking on the door of the International Monetary Fund (IMF) for another bailout. Once again, we are required to inject Rs400 billion into the power sector as we did back in 2013.

Why are we stuck in this vicious cycle despite consistent economic expansion over the last many years? Why do we get sucked into the so-called debt trap time and again? Why does every government have to take loans to keep the economy going? As per the IMF’s latest mission report, we need to generate more revenues and focus on overdue structural reforms, particularly those concerning state-owned enterprises (SOEs), to not only stabilise the economy but also foster sustained and inclusive growth.

Cumulative losses of SOEs, including PIA, Pakistan Steel Mills, PTV and Railways, over the last five years have surpassed Rs1 trillion. With its overall losses of Rs400bn, PIA alone is costing the exchequer Rs2bn a month.

SOEs suffer mainly because of two reasons. First, unlike private enterprises concerned solely with financial profitability, SOEs are supposed to participate in other socio-economic activities, such as job creation, provision of subsidised products and services and development of competitive priority markets. Second, instead of the chain of command, SOEs are controlled by more than one entity. Consequently, their management struggles to achieve conflicting objectives set by these multifarious stakeholders.